The Council of the European Union has established its position on a revised law designed to increase free carbon allowances for energy-intensive industries covered by heat and fuel benchmarks under the EU Emissions Trading System (ETS) from 2026 to 2030.

The agreement, negotiated at the EU ambassadors' level under Ireland’s Presidency of the Council of the European Union, aims to protect vulnerable manufacturing sectors at higher risk of carbon leakage. Carbon leakage occurs when companies relocate industrial production outside the EU to countries with less stringent climate policies or when European products are replaced by more carbon-intensive imports.

Under the agreed Council position, member states will allocate approximately 88 million allowances available for free distribution, which the European Commission estimates will deliver €6 billion in cost savings to affected industries through 2030. The Council also voted to add an additional 33 million allowances that were previously unallocated because installations had failed to meet standard ETS conditionalities.

Ireland’s Minister for Climate, Energy and the Environment, Darragh O’Brien, welcomed the accord, stating that providing targeted free allowances during the transition period would safeguard jobs and support industrial competitiveness while maintaining progress toward EU climate goals.

The legislative revision was presented by the European Commission in July 2026 to address competitiveness concerns raised by member states and industry groups following updates to ETS benchmarks earlier in the year. Interinstitutional negotiations between the Council and the European Parliament are expected to begin once Parliament establishes its position, with the Irish Presidency seeking a swift final agreement.